The COVID-19 adverse impact on Goan economy

Coronavirus outbreak was first reported in Wuhan, China
on December 31 2019. Since then the
global death toll from the deadly COVID-19 infection crossed 27,000 by March 27
2020. In India, the cases increased to 834 leaving 19 people dead. COVID-19
continues spreading in the world.

India’s economy
was already facing a slowdown and the hit from coronavirus has virtually added
fuel to the fire. Business is at standstill as the lock down has brought the
economic activity to a halt. Goa too is witnessing a severe impact on the
economy.

The Goan economy
is dependent on the tourism and hospitality industry after the shutdown of
mining industry. The coronavirus scare has affected tourism in Goa with crowds
at its famed beaches thinning and hotels reporting cancellations.

Although Goa is
an all year-round tourist destination the state’s ’peak tourist arrival is
during a particular period and usually starts from December and lasts till
early April. However in recent times owing to the MICE segment and FIT traveler
Goa has been receiving a critical part of its tourists in the peak summer and
monsoon seasons.

The Travel and
Tourism Association of Goa (TTAG) held a meeting on March 19 to review the
stringent curbs imposed by the state government in light of the COVID-19 pandemic
and estimated loss of Rs 1,000 crore to
the tourism industry.

The local
hospitality industry has been a major source revenue generation for the economy
and for the government. On an average the hotel industry in Goa earns its
revenue from various factors, be it room rent (55 per cent), F&B (30 per
cent) and other avenues such as banquets, conferences, etc. As per statistics
of the Goa Department of Tourism there are 3,538 hotels comprising of 43,148
rooms and 63 star category hotels with 5362 rooms. Average room revenue per
night generated by upper scale, mid-scale and economy hotels is Rs 10,000, Rs
5000 and Rs 1,500 respectively.

The average
occupancy during this season is approx. 60-75 per cent whereas in current
situation the occupancy is 5- 10 per cent which will amount to a loss of Rs 500 crore assuming that the lockdown
continues for two months. Ground level check from hotel operators reveal that,
they expect nil to max five per cent occupancy over the next three weeks.

The Goa government
has collected Rs 411 crore in revenue from onshore and offshore casinos in the
state in 2018-19 and the same is likely to be adversely affected in 2019-20 and
2020-21. Due to shutdown of the casinos the government might end up losing Rs
70 crore in the combined period of shutdown. Additionally, all other
entertainment streams such as night clubs pubs will have a loss of revenue. The
approx. business done by the recognized pubs across Goa during this period was
valued to be approximately Rs 15 crore.

Since Goa is a
tourist hub, most of the livelihood depends on ancillary services like the taxi
business and other allied services. An individual taxi operator’s average
turnover during this season is Rs 1,000 per day and there are about 32,000
taxis listed apart from private taxi drivers.
With the decline in tourism, taxi business has also shut down and with
the announcement of country wide lockdown the taxi business has gone to zero
facing an approx. loss of Rs 100 crore considering severally reduced business
from March to May 2020.

Pharma sector has
emerged as the single largest industry after the ban on mining and the slowdown
in tourism in Goa. Currently there are over 7000 small scale industrial units
with presence of more than 150 large and medium scale industries employing over
25,000 people directly or indirectly. In Goa almost 90 per cent of the products
and formulations manufactured are exported.

According to the
Goa Pharmaceuticals Manufacturers’ Association (GPMA) the annual turnover of
the industry in the state stands at around Rs 10,000 crore. However, in the midst of the coronavirus
outbreak the Indian government has put restrictions on exports in order to
ensure adequate supply in the domestic market. This will have an impact on
Goa’s exports. Similarly the lockdown has resulted in discontinuing of
operations of several pharma companies which shall definitely result in loss of
revenue during this period.

An important
contributor to the economy in recent times has been the MICE (Meetings,
Incentives, Conferences, and Exhibitions) segment in tourism. With the lockdown
this segment has been virtually paralyzed. Cancellation of events, functions,
parties etc. have not only affected the hospitality segment but also has had an
impact on venues rentals, catering other allied businesses such as decorators,
video and photographers etc.

As per our
research, there are around 10,000 events which happen every year out of which
3,800 are premium events, 1,900 family functions, 1,400 MICE event, 400 are
destination weddings and 100 are other events such as educational, art and
culture etc. In such events premium catering is demanded. In a year premium
catering generates revenue of Rs 132
crore excluding the revenue generated
from normal catering which is approx. to be Rs 150 crore.

Hence considering
a lockdown of two months the expected losses are valued to be Rs 30 crore.

Goa has about 22 industrial estates that are home to
MSMEs. In addition there are several different private companies, commercial
establishments spread across the state.
With the businesses being closed disruptions in income from the local
industry look inevitable.

In addition to
the above, an average consumer spends on leisure activities. These could be on
travel, malls, cinema and food and beverage. With the lockdown and the
continuance for about a month it is expected to cause a loss of Rs 150 crore
considering an average spend of Rs 1000 per month on such activities.

It is obvious
that the effects will be seen for a quarter or two post the outbreak.
Businesses and consumers will take some amount of time to regain normalcy. The
immediate reaction will be to rebuild and be conservative in spending. Savings
shall be the key word and hence economy will be further hit as cash flow in the
economy will be an issue.

The writer is an associate in Panaji based financial
advisory firm, Mangal Analytics and Research Consulting Pvt. Ltd.